Comprehensive annual financial report for the fiscal year ended ...

186 Pages·1998·5 MB·English

by  Montana. Dept. of Administration. Accounting Division

353.0072
A3fc
1998
Montana
Comprenensive Annual
Financial Report
June 30, 1998
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MONTANASTATELIBRARY
3 0864 0014 3468
Artwork courtesy of tke Montana PuLlications and Graphics Division
MONTANA
COxMPREHENSrVTE ANNUAL
FINANCIAL REPORT
for tne fiscal year enaed June 30, 1998
Preparea By:
Department of Administration
Lois Mcnzies, Director
Accounting ana Management Support Division
Cathy Muri, CPA, Acting Administrator
Accounting Principles/Financial Reporting Section
CGFM
Staci Litsckauer, CPA,
CGFM
D. WliitaUer, CPA,
J.
CPA
Carol SwicU,
Operations Section
Linda Gaugnan
Mark Curtis
John E. Barbagello II
Penny C. Killnani
-
I
STATE OF MONTANA
SELECTED STATE OFFICIALS
EXECUTIVE
Marc Racicot
Governor
Judy Martz
Lieutenant Governor
JUDICIAL
A. Tumage
J.
Cniei Justice
LEGISLATIVE
Gary Al^lestad
President oi the Senate
John Mercer
Speaker oi the House
- II

STATE OF MONTANA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FISCAL YEAR ENDED JUNE 30, 1998
TABLE OF CONTENTS
Page
INTRODUCTORY SECTION
Title Page i
Selected State Officials ii
Organization Chart Hi
Table ofContents iv
LetterofTransmittal 1
Graphic Presentations:
Revenues By Source - All Governmental Fund Types 8
Expenditures By Function - All Governmental Fund Types 9
GFOA Certificate ofAchievement 10
FINANCIAL SECTION
IndependentAuditor's Report 14
General Purpose Financial Statements (Combined Statements - Primary Government
and Combining Statements - Component Units):
Combined Balance Sheet - All Fund Types, Account Groups and
Discretely Presented Component Units 16
Combined Statement ofRevenues, Expenditures and Changes in Fund Balances -
All Governmental Fund Types and ExpendableTrust Funds 20
Combined Statement ofRevenues, Expenditures, Other Financing Sources (Uses) and Reconciliation
ofBudget and Actual (Budgetary Basis) to GAAP Basis - Unreserved Fund Balance
General and Special Revenue Fund Types 21
Statement ofChanges in Plan NetAssets - InvestmentTrust Fund 22
Combined Statement ofRevenues, Expenses and Changes in Retained Earnings/
Fund Balances - All Proprietary Fund Types, SimilarTrust Funds and
Discretely Presented Component Units 23
Combined Statement ofCash Flov^^s - All Proprietary Fund Types, Nonexpendable
Trust Funds and Discretely Presented Component Units 24
Combining Balance Sheet- Component Units - Proprietary FundTypes 26
Combining Statement ofRevenues, Expenses and Changes in Retained Earnings-
Component Units - Proprietary Fund Types 27
Combining Statement ofCash Flows- Component Units - Proprietary FundTypes 28
Combining Statement ofPlan NetAssets - Component Units - Pension Trust Funds 30
Combining Statement ofChanges in Plan NetAssets - Component Units -
Pension Trust Funds 32
Combining Balance Sheet - Component Units - All Higher Education Funds 34
StatementofChanges in Fund Balance - Component Units - All Higher Education Funds 36
Statement ofCurrent Funds Revenues, Expenditures, Transfers and OtherChanges -
Component Units - Higher Education Fund Type 38
Notes to the Financial Statements
1 Summary ofSignificantAccounting Policies 39
2 Budgetary Reporting 44
3 OtherAccounting Issues 45
4 Cash/Cash Equivalents and Investments 45
IV-
5. Fixed Assets 49
6. Retirement Systems 50
7 Other Postemployment Benefits 57
8 Deferred Compensation Plan 57
9. Risk Management 58
10. Commitments 62
1121. SLteaatseesD/eIbntstallment Purchases Payable . . '..'.'.'.'.'.'.'.'.'.'.'.'.'.'.'.'.'.'.'.'.'.'.'. 6643
13. Interfund Transactions 71
14. Fund Deficits 74
15. Reserved Fund Balances forTrusts 74
16. Segment Information 75
17. Contributed Capital .....[....... 76
18. Related Party Transactions 75
19. Contingencies 76
20. Subsequent Events 70
21 Year2000 Issue ''''''''.'.'.'.'.'-'.'.'..'.'.'.'.'.'..'.'.'..'.'.'......' 78
Combining, Individual Fund and AccountGroup Statements/Schedules - Primary Government:
Governmental Funds
Special Revenue Funds
Combining Balance Sheet 84
Combining Statement ofRevenues. Expenditures and Changes in Fund Balances ....... 85
Schedule of Revenues, Expenditures and Other Financing Sources (Uses)
Budget and Actual with Reconciliation of Unreserved Fund Balance
per the Statewide Budgeting and Accounting System (SBAS) to Budget
Basis Statement in the GPFS - Special Revenue Funds 86
Debt Service Funds
Combining Balance Sheet 88
Combining Statement ofRevenues, Expenditures and Changes in Fund Balances ........... 90
Capital Projects Funds
Combining Balance Sheet 94
Combining Statement ofRevenues, Expenditures and Changes in Fund Balances .......... .95
.
Proprietary Funds
Enterprise Funds
Combining Balance Sheet 98
Combining Statement ofRevenues, Expensesand Changes in Retained Earnings 102
Combining StatementofCash Flows 106
Internal Service Funds
Combining Balance Sheet
Combining Statement ofRevenues, Expenses and Changes in Retained Earnings 111184
Combining Statement ofCash Flows 122
Trustand Agency Funds
Combining Balance Sheet-All Trustand Agency Fund Types 131
Expendable Trust Funds
Combining Balance Sheet 134
Combining Statement of Revenues, Expenditures and Changes in Fund Balances .......... ^36
Nonexpendable Trust Funds
Combining Balance Sheet
14q
Combining Statement ofRevenues, Expenses and Changes in Fund Balances 142
Combining Statement ofCash Flows ' ' ' 144
Investment Trust Fund
Statement ofPlan NetAssets I47
Agency Funds
Combining Balance Sheet
15q
Combining StatementofChanges in Assets and Liabilities .......................... ^52
•V-
'
STATE OF MONTANA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FISCAL YEAR ENDED JUNE 30, 1998
TABLE OF CONTENTS (Continued^
General Fixed Assets AccountGroup
Schedule ofGeneral Fixed Assets by Source 159
Schedule ofGeneral Fixed Assets by Function and Activity .....................'. I6O
Schedule ofChanges in General Fixed Assets by Function and Activity ............... 161
STATISTICAL SECTION
Revenues by Source -All Governmental Fund Types 165
Expenditures by Function -All Governmental Fund Types ..'. 155
Property Tax Levies and Collections I55
Taxable and Market (Assessed) Value ofProperty 166
Property Tax Rates - Direct and Over Lapping Governments 167
Property Tax Mill Levy for State Purposes . 167
Ratio ofDirect State Debt toAssessed Value and Direct State Debt perCapita 168
Ratio ofAnnual Debt Service to Total General Expenditures 168
Revenue Bond Coverage - Higher Education ' 159
Revenue Bond Coverage - Montana Board ofHousing 169
Revenue Bond Coverage - Economic Development Bonds 170
Property Value, Construction and Bank Deposits 171
Income Data
172
DEPuembmploligocryEamdpeuhncitactiinSotnMatoiInsnttsitacinstautiIonndsusEtnrrioelslment [' I11777443
MMiasjcoerlPlrainveaotuesESmtpaltiosyteircss in Montana 117755
•VI
DEPARTMENT OF ADMINISTRATION
DIRECTOR'S OFFICE
MARCRACICOT,GOVERNOR MITCHELLBUILDING
OF MONTANA'
,?rATF
POBOX200101
(F4A06X)444444--22083122 HELENA,MONTANA 59620-0101
Novembers, 1998
Tothe Citizens, Governorand Members ofthe Legislature ofthe State ofMontana:
AInnnaucaclorFdiannacneciwailthReSpeocrttio(nC1A7F-R2)-11of0,thMeonSttaatneaoCfoMdoentAannnaotfaotretdhe(MfiCsAc)al yIeaamrpelnedaesdedJutonesub3n0r,iit19t9h8e.CorR^epsrephoenn^s^i^b^^l^i^t^y
for the accuracy of the data presented and the completeness and fairness of the presentation rests with the
Department of Administration. To the best of our knowledge and belief, the enclosed data are accurate in all
material respects and are reported in a manner designed to present fairly the financial position and results of
operations ofthevarious funds and accountgroups ofthe State ofMontana. All disclosures necessarytoenable
the readerto gain an understanding ofthe State'sfinancial activities are included.
Description ofthe CAFR
This report and the accompanying financial statements and statistical tables were prepared in accordance with
standards setforth by the Governmental Accounting Standards Board (GASB).
TihnicsluCdeAsFaRniosrgdainviizdeadtioinntochtahrrteeformatihne Ssteacttei,onas:tabilnetroofduccotnotrey,ntfsinaanndciatlhisantdransstamtiitsttailcall.etteTrh.eTihnetrfoidnuacntcoirayl sseeccttiioorni
contains the independent auditor's report, the general purpose financial statements, notes to the financial
statements, combining statements by fund type, and other schedules. The statistical section includes financial,
economic and demographicdata.
TQfccoohrooarignvusawssenhiremiidezmpceateohrthrneietttodh)niSe'ntiascanSltntguedda'doetsevtietseesfrraiicnlmsnloiiafmfnnnicupgininnoaadbgnnlcsoeifdsnaaiytltnnlaadyatunnnecaaiimdcctaesccl.n(oo1tuua)sTnncthcttthoaeougebnrclbtSoeoeatu,mbapipmtosloeirisnotiwlfeyse.hntaaohtbdosliTuseennhegiettreosseonlteriaiarmtticeiipnreoocisentonssettmehrhipiiatlaitpiteescstwioeinwtit.cmhlhlpalutrtTdoihaehnsereeeatShptlGtapehatAogetaiSoelnSrlBttgyiiasansthnsgeeiaupzsocaaafrhtsaMivettooothetnnaifttfonorargreotnxh(mmac2a)lcjhr(uotitestrhhieieeSortrtinpyeaarwtiioteosfomuablbahrudenyet
potential forthe organization to provide specificfinancial benefits to, or impose specificfinancial burdens on, the
State Thefollowingcomponentunits are included inthe State'sfinancial reporting entity: HousingAuthority^ Health
TFaecaiclhiteiress'ARutehtoirrietmyenSttSatyestCeommpaenndstahteiCoonllIengseusr,anUncieveFrusintdie(sOladndanCdolNleewge)s,oPfubTleicchnEomlpolgoyy.eeTsheRseeticroemmpeontneDnitvisuinoint,s
are discretely presented in the State's financial statements.
Economic Condition and Outlook
Montana's growth rate inthe 1990s has steadilyconverged on its predicted long-term sustainable rate of2 percent
pienrcoymeearavaenrdagleonagn-ntuearlmfgorroewctahstrsatperodjeeccltintheids g0r.o2wrptehrcteonctontoti2n.u5eptehrrcoeungthinth1e99y7e,ardo20w1n0.froMmon3t2anpaerscennotni-nfa1r9m94laabnodr
the4 to 5 percentgrowrth rates inthe eariy 1990's. As Paul Polzin, directorofthe UniversityofMontana Bureau
o1f99B0ussiwnaesssduaendtoEtceomnpoomriacryRfeascetaorrschs,ucihndaiscaatecdo,nstthreucstlioowndboowonmwaansdefxapsetcgtreodw.thTihnehirgahp-itdecghroiwntdhusrtanteesinantdheweoaurilay
eventually end.
Personal incomeincreased by4.2 percentin 1997which is neariytwicethe inflation rateof2.3percent. Montana's
non-farm wage and salaryjobs increased by 7,600 in 1997. Thejob market is expected to increase at a rate ot
9400 jobs peryearbetween 1997 and 2006. Mostjobgrowth is projected tobe in the services-producing segment
ofthe Montana economy, which iscomprised ofindustries that do not produce a physical ortangible product sucti
as eating and drinking establishments, health services, business services, social services, public educational
services, general merchandise stores and recreational services.
ATlhteho1u9g9h7Mpoonptualantai'osn,poepsutliamtaitoendctoontbienu8e7s9,t0o00i,ncrreefalseec,tsthaenainnncuraelasgeroofwt8h0,r0a0te0hoars10b.e0g1unpearcpernotjescitnecdes1l9o9w0.doTwhrve
go1fr6ogwrptoehwrtcfehonrittshaeevxesptreaactgteeeidannttonhueaav1le9r8i0an'gcsre.ea1sM.e5onpitneartnchaeen'ts19tp9ho0rp'ousulcgahotimtophnaerilseaspttretorojyetcehteaermdsetoaofgetexhrec0ed.ee2dcpa1edrmecielsnllitoonwaivinengr2ad0g1oe0w.annTtnouhaeala1pn.o0npupuaellractreiaontnte
annual growrth rate in the firstdecade ofthe next century.
-1 -
•ANEQUALOPPOmXINITYEMPLOYeir
Agriculture continues to be Montana's largest basic industry It accounts for over 30 percent of the state's
employment, labor income and gross sales. Approximately 60 million ofthe state's 93 million acres are used for
farming and ranching. Montana agriculture generates about $2 billion in cash receipts. Total revenues have
remained constantforapproximately40 years, butthe mix ofrevenues has changed. Livestock prices rebounded
dramatically in 1997which may reflecta bottoming ofthe currentcattle cycle. Ifso, Montana should see continued
strength in cattle prices overthe next few/ years. Wheat prices have been above average forthe lastfew years
due, in part, to relatively lowyields in other parts ofthe U.S. and otherwheat producing regions around the world.
Asthese regions return to more normal production, wheat prices are expected to decline. In addition, the planting
flexibility associated with FAIR Act maycause some shifting ofproduction outofwheatto more highly valued crops
which will have a modest impact on wheat prices. Government transfer payments will decline over the next five
years, forcing Montana producers to replace the income lost from government payments with income from the
market place.
Much ofMontana's manufacturing industry istiedtothe state's natural resources. The State's manufacturing sector
produces more than $5 billion in output annually and employs 30,000workers earning $870 million in annual labor
income in 1997. The largestcomponent, wood, paper and furniture products manufacturing, is based pnmanly on
Montana'stimberresource and contributes approximately40 percentofthe state's manufactuhng labor income and
37 percentofemployment. During the first halfof 1997, record pnces for lumber led to increased production and
employment. However, in the second halfof1997, Japan and a numberofotherAsian countries expenenced sharp
declines in economic activity which contnbuted to reduced global demand, and the lumber prices fell 10 to 25
percent belowJune 1997 levels by the end ofthe year, in late 1997, three small to medium sawmills announced
closures dueto reduced timberavailability and large swings in lumber pnces. Overall, with growing global demand,
the long-term market outlook for Montana's wood and paper products industry is positive. However, timber
availability remains the majordownside riskforthewood products industry
The overall outlookformanufacturing isforstability. On the positive side, a numberofnew facilities came on line
in 1997. A major addition in 1998, the Advanced Silicon plant in Silverbow County, will employ several hundred
workers by the end of 1999.
Major Initiatives
In FY98 General Fund revenues rose $22 million overprojections due primarily to increased income tax revenues.
Federal tax reform may be responsible fora portion ofthis increase as well as a tax paid through a profit sharing
settlementagreement reached between the Columbia Falls aluminum plan and its employees. Current projections
call for General Fund revenues to exceed FY99 estimates by $16 million.
The legislature approved state school support increases of $47.1 million in the general fund with funding for
entitlement increases, expansion of school facility aid, initiation of a technology funding program and an
appropriationfora one-time influx ofnew money to be used at each school's discretion fortextbooks, technology,
building maintenance, orlibrary matenals. In addition, the legislature approvedfunding foran effort to improve and
measure the productivity and accountability of schools. Increases in district property tax obligations ofover $15
millionforGuaranteed Tax Base (GTB) paymentswhichwould have resulted from cyclical reappraisal were shifted
tothe State. In FY98 school enrollmentsdropped slightly below projected levelswith corresponding savings in state
aid anticipated in FY99.
The budget includes funding to reimburse schools and local governments for reducing the Montana business
personal tax to its lowest level this century. Montana had the highest business equipmenttaxes in the nation which
was based on assessed value, and the continuation of this reduction allows the State to compete for new
investments, jobs and economic opportunity. The reduction of this tax by one-third, as adopted by the 1995
Legislature, will costan additional $22 million in the 1999 biennium. In addition, the legislature chose to phase in
thereappraisalofreal propertyinclasses3,4, and 10. This phase-in allows propertytaxpayersto avoid an increase
ofnearly$80 million intaxesdunngthe 1999 biennium. However, a lawsuitwas filed in District Courtwhich claimed
the phase-in provision is unconstitutional. On July 26, 1998, the District Court in Lewistown ruled the provision is
unconstitutional because itviolatesthedue processand equal protection clausesof the Montana and United States
Constitutions andthe equalization clause ofthe Montana Constitution. The StateofMontana anticipates appealing
the decision to the Montana Supreme Court.
The legislature provided $40 million in new general funds above the 1997 biennium funding levels to strengthen
corrections programs atthe state and local level. Construction ofnearly $31 million in newfacilities was approved.
The legislature continued tofund an expansion ofthe numberofprison beds purchased privately from other states
and authorized a request for proposal (RFP) to develop private pnsons in Montana. However, in FY98 previous
expectations ofcorrectional population growth are being revised downward.
The State implemented its Mental Health Managed Care initiative. The initiativewill establish Medicaid eligibility
formental health benefitsforfamilies and personswith incomesatorbelow 200 percentofthefederal poverty level;
determine eligibility by income only (no resource limits will be imposed); charge families with higher incomes for
services based on a sliding fee scale; and include services to adults and children. In addition, Montana expanded
the physical health managed care program entering into a contractwith an outside providerto administer HMO and
the Passport managed care programs. In FY98welfare (TANF and Medicaid) caseloadsfell below levels onginally
anticipated which resulted in reversions ofnearly $4 million.